Multinational hospitality chain Oyo Hotels and Homes has raised USD 660 million in debt funding from global investors, which is 10% more than what it was seeking a couple of months ago. This round of funding will be utilized to pay back its existing loans, invest in ramping up its technology, and recover the company from the COVID-19 slump.
Oyo’s term loan B (TLB) was oversubscribed 1.7 times with a commitment of close to USD 1 billion from investors including Fidelity, Citadel Capital Management, and Varde Partners, local media Economic Times said, citing sources.
TLB refers to a secured and syndicated credit facility from global institutional investors, which has a small repayment schedule. According to the deal, Oyo will pay the principal amount after six years but continue to pay the interest at regular intervals.
In March this year, it was in the market seeking USD 600 million at an interest rate of 850 basis points. However, with an increase in interest from institutional investors, it raised USD 660 million in debt at a discounted rate of 825 basis points.
The SoftBank-backed company’s last equity funding was for its Series F round, when it raised USD 693 million and USD 807 million between 2019 and 2020 from RA Hospitality and SVF India Holdings, a unit of SoftBank Vision Fund. It further raised USD 7.4 million in January this year from Hindustan Media Ventures as an extension of the same round.
A large chunk of its business, around 43%, comes from India and Southeast Asia, while Europe contributes 28%. The remaining 29% of its revenue comes from other parts of the world.
India’s hospitality sector is one of the worst-hit sectors due to the pandemic, which slowed down Oyo’s growth last year. Unfortunately, just as the situation was coming under control this year, the country was hit with a second wave, which saw daily reported cases mounting by up to 400,000 a day.
In a blog post, Ritesh Agarwal, founder of Oyo, said the company is seeing strong signs of recovery in India, Southeast Asia, and Europe. The India business, he said, is EBITDA (earnings before interest, taxes, depreciation, and amortization) positive. Agarwal claimed the company has cash reserves of USD 800 million. He said Oyo has 100,000 hotel partners globally and is adding over 11,000 rooms every month in India.
“We are seeing a healthy recovery, with a vaccination rate of over 40% (of the total population) in Europe. In India, we are three to four months away from a vaccination rate of more than 40%. Once India is there, it means a much stronger recovery is coming up,” Abhishek Gupta, the group’s chief financial officer of Oyo, said in a statement.
